Enterprise Zone Tax Credit
Description:
Businesses located in a Maryland enterprise zone may be entitled to a tax credit for wages paid to newly hired employees. The local enterprise zone administrator must certify the business to qualify for the credit.
The credit may be taken against corporate income tax or personal income tax.
Sole proprietorships, corporations, tax-exempt nonprofit organizations and pass-through entities, such as partnerships, subchapter S corporations, limited liability companies and business trusts may claim the tax credit.
To qualify for the credit:
The business must hire at least one employee who:
- Is a new employee or an employee rehired after being laid off for more than one year;
- Worked for the business for at least 35 hours per week for six months or more;
- Earns at least 150 percent of the federal minimum wage;
- Spends at least 50 percent of the workday either in the enterprise zone or on activities of the business resulting from its location in the enterprise zone or focus area;
- Is hired after the date the enterprise zone was created or the date the business located in the enterprise zone or focus area, whichever is later; and
- Is not hired to replace an individual employed by the business within the last four years.
If the individual is economically disadvantaged, the business must obtain certification from the Maryland Department of Labor, Licensing and Regulation.
How the credit is calculated:
The credits are based on the wages paid during the tax year to each qualified employee. The credits allowed are the amounts shown in the following table, or the wages paid to the employee, whichever is less:
Is the business located in a focus area? |
| |
No |
Yes |
Is the employee certified economically disadvantaged? |
Is the employee certified economically disadvantaged? |
Yes |
No |
Yes |
No |
1st year
2nd year
3rd year |
$3,000
$2,000
$1,000 |
$1,000
$0
$0 |
$4,500
$3,000
$1,500 |
$1,500
$0
$0 |
If the credit is more than the tax liability, the unused credit may be carried forward for the next five tax years.
Documentation required:
Corporate income tax:
Form 500CR must be completed and submitted with the income tax return (Form 500).
Personal income tax:
Form 500CR must be completed and submitted with the income tax return (Form 502 or 505). If the business is a pass-through entity, Form 500CR must be prepared for the pass-through entity and submitted with the entity's income tax return (Form 510). A modified federal Schedule K-1 provided by the pass-through entity to its members must separately state their shares of the credit. Individuals or entities must attach this statement to the Form 500CR submitted with their personal (Form 502 or 505), corporate (Form 500) or pass-through entity (Form 510) income tax returns.
For more information, contact:
Maryland Department of Business and Economic Development
Division of Business Development, Tax Incentives Group
217 E. Redwood Street
Baltimore, MD 21202
Phone: 410-767-6438 or 410-767-4980
E-mail: taxincentives@choosemaryland.org
